Shares in racing games maker Codemasters (CDM:AIM) accelerated 20% to an all-time high of 642p after its board rejected a previous cash and shares takeover offer from US software firm Take-Two Interactive and instead recommended a substantially higher all-cash offer from Take-Two arch-rival Electronic Arts.
The new offer of 604p per share values Codemasters at £945 million, a significant premium to Friday’s valuation of £835 million and almost 25% above Take-Two’s initial £759 million or 485p per share offer.
GLOBAL LEADER
Electronic Arts (EA), which is well-known for its FIFA football and Need for Speed game franchises, said it believes the tie-up with Codemasters ‘will create a global leader in racing entertainment’.
‘Bringing together Codemasters' critically-acclaimed sports and racing franchises Formula One, DiRT®, GRID® and Project Cars with EA's global Need for Speed franchise, fan-favourite Real Racing mobile game and EA SPORTS brands, along with the combined expertise of the respective teams, will allow EA to innovate further and meaningfully increase the delivery of content and experiences that appeal to a growing, global audience for racing entertainment.’
Take-Two responded this morning saying it is ‘considering its position in relation to Codemasters and would make an announcement when it was appropriate, although the fact that Codemaster shares are trading at a premium to the new EA offer suggests the market expects Take-Two to come back with an even better offer.
FAIRER PRICE
Shore Capital analyst Katie Cousins is less convinced, downgrading her recommendation from buy to hold on the basis that EA’s offer is ‘fair’ as it implies a 2021 ratio of enterprise value to earnings before interest, taxes, depreciation and amortsisation (EV/EBITDA) of 30 times, compared with an average multiple for the gaming sector of 29 times.
‘We believe this morning’s counter-offer better reflects the quality and future outlook for Codemasters and also note our preference for a cash offer rather than the previous heavy weighting on US paper. The value of the new offer is more akin to the sector average and provides a greater premium to Codemaster’s current trading value and the Take-Two bid’, added Cousins.
